Is an ad-based business model the original sin of the web — and if so, what do we do about it?

Ethan Zuckerman, director of the Center for Civic Media at MIT and co-founder of the blog network Global Voices, argues in a fascinating post at The Atlantic that the “original sin” of the internet was that almost every web business defaulted to an advertising-based business model — and that this in turn led to the privacy-invading, data-collecting policies that are the foundation of companies like Facebook and Google. But is that true? And if so, what should we do about it?

Zuckerman says his thoughts around advertising and its effects were shaped in part by a presentation that developer Maciej Ceglowski gave at a conference in Germany earlier this year. Ceglowski is the founder of Pinboard, a site that allows users to bookmark and store webpages, and someone who has argued in the past that free, ad-supported services are bad for users, since they usually wind up having to sell the company to someone who will ultimately shut it down.

Ceglowski describes the arrival of Google as a turning point, since the company — which started out as a kind of science project with no business model whatsoever — eventually created what became AdSense, and showed that advertising could be a huge revenue generator for a web business:

“The whole industry climbed on this life raft, and remains there to this day. Advertising, or the promise of advertising, is the economic foundation of the world wide web. Let me talk about that second formulation a little bit, because we don’t pay enough attention to it. It sounds like advertising, but it’s really something different that doesn’t have a proper name yet. So I’m going to call it: Investor Storytime.”

A fairy tale of advertising revenue

By “investor storytime,” what Ceglowski means is the fairy tale that most web and social companies tell their venture-capital investors and other shareholders — about how much money they will be able to generate once they add advertising to their site or service or app, or aggregate enough user data to make it worth selling that information to someone. Ceglowski calls this process “the motor destroying our online privacy,” the reason why you see facial detection at store shelves and checkout counters, and “garbage cans in London are talking to your cellphone.”

Zuckerman notes that he played a rather critical role in making this future a reality, something he says he regrets, by coding the first “pop-up” ad while he was working at Tripod, an early online portal/community web-hosting company, in the late 1990s (a solution he says was offered to an advertiser because they were concerned about having their advertisement appear on a page that also referred to anal sex). And as advertising has become more ubiquitous, companies have had to come up with more inventive ways of selling ads — and that means using big data:

“Demonstrating that you’re going to target more and better than Facebook requires moving deeper into the world of surveillance—tracking users’ mobile devices as they move through the physical world, assembling more complex user profiles by trading information between data brokers. Once we’ve assumed that advertising is the default model to support the Internet, the next step is obvious: We need more data so we can make our targeted ads appear to be more effective.”

In his post, Zuckerman admits that free or ad-supported content and services have many benefits as well, including the fact that they make the web more widely available — especially to those who couldn’t afford to pay if everything had paywalls — and that being based on advertising probably helped the web spread much more quickly. But he also says that advertising online inevitably means surveillance, since the only important thing is tracking who has actually looked at or clicked on an ad, and knowing as much as possible about them.

Micro-payments, or find a way to fix ads?

So what should we do to solve this problem? Zuckerman’s proposed solution is to implement micro-payments, using Bitcoin or some other method — something that wasn’t possible when the web first arrived. In that way, he says, users will be able to support the things they wish, and won’t have to worry about paying with their personal information instead of cash. He asks: “What would it cost to subscribe to an ad-free Facebook and receive a verifiable promise that your content and metadata wasn’t being resold, and would be deleted within a fixed window?”

In a response to Zuckerman’s post, Jeff Jarvis argues that instead of throwing our hands up and declaring that advertising as a model doesn’t work any more, we should be re-thinking how advertising works and trying to improve it. Although he doesn’t mention it, this seems to be part of what interested VC firm Andreessen Horowitz about BuzzFeed, and caused it to give the company $50 million, valuing the company at close to $1 billion. AH partner Chris Dixon has talked about the benefits of BuzzFeed’s version of “native advertising” or sponsored content — content that is so appealing and/or useful that it ceases to be advertising.

For my part, I think Zuckerman has a point to a certain extent: an ad-based model does encourage companies to try and find out as much about their users as possible, and that often causes them to cross various ethical boundaries. But this isn’t something the internet invented — newspapers and magazines and political campaigns have been doing that kind of data collection for decades. The web just makes it orders of magnitude easier. In other words, it probably would have happened even if advertising wasn’t the foundation for everything.

One of the big flaws in Zuckerman’s proposal is that it would still make large parts of the web unavailable to people without the means to pay, either in Bitcoin or something else. And like Jarvis, I think advertising could become something better — if native advertising is useful or interesting enough, and it meets the needs of its users, then it should work much better than search keywords or pop-ups. That’s not to say we shouldn’t force companies like Facebook to be more transparent about their data collection — we should do that as well, not just let them off the hook by allowing them to charge us directly.